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Insurer: ACA Risk Payments Use ‘Flawed’ Methodology

Albuquerque Journal (NM)

Affordable Care Act risk payments are in limbo until a lawsuit is sorted out.

The Centers for Medicare and Medicaid Services announced this past weekend that the Trump administration is altering yet another part of the Affordable Care Act: the risk adjustment program, which transferred payments from insurers with healthier patients to those with a sicker clientele. Those payments — worth billions of dollars collectively — are now suspended.

At the heart of the decision, according to a CMS news release, was a lawsuit brought to federal court by health insurance co-op New Mexico Health Connections. Earlier this year in Albuquerque, U.S. District Judge James O. Browning agreed with Health Connections that the methodology used to calculate the risk payments was flawed.

CMS said in the release that the government asked the court to reconsider its decision after a federal judge in Massachusetts made a contrary ruling, and that the payments would be suspended until “the litigation is resolved.”

The announcement elicited statements from insurance associations claiming the payment suspensions would create instability in the industry and likely increase premiums.

But Health Connections’ CEO Marlene Baca said the ruling was a positive development for both the company and the industry, particularly for small insurers who had been penalized by the program.

“We feel very strongly that this particular program is flawed,” said Baca.

Baca said the company would welcome a risk adjustment program with a revised methodology and that Health Connections has money to cover its 2017 risk adjustment obligations should the payments be reinstated. A CMS report released Monday showed New Mexico Health Connections would have had to pay a net sum of about $5.6 million in that scenario.

Dr. Martin Hickey, CEO of Health Connections when the organization filed the lawsuit in 2016 and now the CEO of True Health New Mexico, agreed with Baca’s assessment of the ruling.

“People are asking, ‘Is this going to make things unpredictable?’” said Hickey. “But it’s always been unpredictable. We need a new formula that has less of a negative impact and encourages more entrance and competition in the marketplace.”

Risk adjustment payments played a major role in Health Connections’ financial issues in recent years. Last year, the company received an $8.9 million risk adjustment bill, which brought Health Connections to the brink of state control.

The company has since been buoyed by the $10 million sale of its small- and large-group business line to Arlington, Va.-based Evolent Health. The deal gave rise to True Health.

Health Connections is one of four co-ops still in existence out of the 24 created by the Affordable Care Act. A 2016 Congressional report found that risk penalties were one of several factors that led to the demise of many of the co-ops.

On Monday, two of New Mexico’s large insurance organizations told the Journal they were still weighing the consequences of the CMS announcement.

In an email, a spokeswoman for Blue Cross and Blue Shield of New Mexico said the company is “currently assessing the implications and any potential impacts as a result of this development.”

Last year, the same year Health Connections received an $8.9 million risk adjustment bill, Blue Cross Blue Shield of New Mexico received about $8.8 million from the program, according to a CMS report from that year.

Presbyterian Health Plan President Brandon Fryar said that while his organization is also evaluating the situation, “we do not believe it will impact our operations extensively.”